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Cost of debt redeemable in

instalments :-

V = I +P
d 1 1 + I2+P2 + I3+P3_ + …..… + In+Pn___

(1+K d)^1 (1+K d)^2 (1+K d)^3


(1+Kd)^n

COST OF EXISTING DEBT :-


Current market yield need to be
considered

COST OF zero coupon


bonds :-
No interest is payable
Floating or variable rate debt
:-
Before tax After tax

K db = 7% + 3% = 10% K da = 10%(1-0.35) =
=6.5%
Real or inflaton adjusted
cost of debt :-
= 1 + Normal cost of debt
1 + Inflation Rate

Cost of preference
capital
K= p D Where , D = divident
P

K p = D.
NP

Redeemable :-
K pr = D + MV – NP
N .
½ (MV +NP)
Where M.V = maturity value of shares

Eps :- Earning per Share


EPS = Profit availability to equity share holder
Number of shares

[100% pay out]

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